TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 55
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....x on the taxable value received for advertising services. A show cause notice bearing F. No. V/STS/GR. IX/DN-II/1479/2004 dated 26/10/2004was issued to the appellant on the ground that they had failed to pay service tax of Rs. 27,46,030/- on the taxable value of Rs. 5,26,70,587/- received by them during 1/4/2000 to 30/6/2003 for advertising services. The said show cause notice had been adjudicated vide Order-in-Original dated 30/12/2008 wherein it was held that the tripartite agreements between the appellant, M/s Hero Honda Motors Ltd. and the cricket players was for endorsing the products and brand of M/s. Hero Honda Motors Ltd. by the cricket players as models and advertised by the appellant through various mediums e.g. television, radio, displaying the product on the cricket bats etc. throughout the contract territory during the contract period only. It was also held that the appellant even if they claim they are not known as an Advertising Agency, had provided services connected with display of advertisements during 1/4/2000 to 30/6/2003 as per definition under Section 65(3) of the Act, and not business auxiliary services which became taxable only w.e.f. 1/7/2003. The departmen....
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....itation he submits that show cause notice for the period 1/4/2000 to 30/6/2003 has been issued on 26/10/2004 i.e. after more than one year, therefore show cause notice is time bar. He submits that appellant was already registered under the head of Event Management Servcie way back in 2002 and the BAS was included in the registration and they started paying service tax from 1/7/2003 therefore appellant was very much registered and the activity was known to the department. Therefore there is no suppression of facts on the part of the appellant; hence extended period could not have been invoked. In this support he placed reliance on following judgments: (a )Essel Packaging Ltd. Vs. CCE[2000(117) ELT 466(Tri)] (b) Polymers & Transmission Products Vs. CCE [2000(117) ELT 119(Tri.)] He further submits that the issue in the present case involves interpretation of law, therefore the penalties imposed under Section 76 and 78 are not correct. In support of this submission he placed reliance on following judgments: (a)Century Cement Vs. CCE [2002(150) ELT 1065(Tri)] (b)Biolwara Spinners Ltd. Vs. CCE [2001(135) ELT 719 (Tri)] (c)Haryana Roadways Engg. Vs. CCE [2001(131) ELT 662(Tri....
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....evant clauses of the tripartite agreements between appellant, M/s. Hero Honda Motors Ltd. and Cricket players. Relevant paras of said agreements are extracted below: Agreement of Shri Sourav Ganguly This agreement made this day of 21st June, 2002 at New Delhi between M/s. Hero Honda Motors Limited, a company incorporated under the Companies Act, 1956 and having its registered office at 34 Basant Lok, Vasant Vihar, New Delhi (hereinafter as Hero Honda, which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the first part. And M/s. PERCEPT D'MARK (INDIA) PRIVATE LIMITED, a company incorporated under the Companies Act 1956 and having its registered office at Percept House, 22, Raghuvanshi Estate, 11/12, Senapati Bhapat Marg, Mumbai 400013(hereinafter referred as Percept, which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the Second part. And SOURAV GANGULY, an individual residing at 2/6, Biren Roy Road, Barsha (East), Kolkata- 700008(West Bengal).( Herein after referred as SOURAV) of the Third Part. WHEREAS (A) SOURAV ....
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.... at RZ-145, Laxmi Garden Nazafgarh, New Delhi-43 (hereinafter referred to as the Model) of the Second Part. M/s. Hero Honda Motors Ltd., a company incorporated under the Companies Act, 1956 and having its registered office at 34 Basant Lok, Vasant Vihar, New Delhi, 110057 ( hereinafter as reffered to as Client, which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the THIRD PART. And Collage Sports Management, partnership firm and having its office at 56, Community Centre, East of Kailash, New Delhi-1100065 (hereinafter referred as Collage Sports Management which expression shall include its successors and assigns) of the FOURTH PART. WHEREAS Percept D'Mark has been appointed by the Client as the agency in connection with the promotion of the products which includes motorcycles, scooter and mopeds; AND WHEREAS Collage Sports Management India, interalia, carriers on the business of Sports Management and is representing the Model with respect to marketing and other commercial activities, for and on behalf of the Model; AND WHEREAS the model has agreed with Percept D'Mark to act as a model in connectio....
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....(the 'Services').'Services to be provided by the Model will take place on mutually convenient dates and in mutually convenient locations to be agreed in the light of the Models professional and other commitments, provided the Model shall co-operate with the Client to in the co-ordination of his schedule with the Clients need for his Services, and subject to the Client provided for all travel, meal and accommodation expenses, including business class airfare and five star accommodation/suitable accommodation wherein facility is not available for the Model. It is clarified for the avoidance of doubt, that days of availability of the Model shall be exclusive of travel time and one full shooting day shall mean a maximum ten (10) hours at the destination city where the shooting shall take place, i.e. from the time of arrival to the time of departure. 6. CREATIVE APPROVAL The Model has the right of reasonable approval of all commercials and films in storyboard form and the copy of all print advertisements, provided however, that such approval, shall be limited to depictions of the Model and to words spoken by or attributes to him, and provided further that The Model shall not unreas....
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....Basant Lok, Vasant Vihar, New Delhi-110057 (hereinafter as {Hero Honda, which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the first part. And M/s. Percept D'mark (India) Private Limited, a company incorporated under the Companies Act 1956 and having its registered office at Percept House, 22, Raghuvanshi Estate, 11/12, Senapati Bhapat Marg, Mumbai 400013 (hereinafter referred as Percept, which expression shall, unless repugnant to the context or meaning thereof, be deemed to include its successors and assigns) of the Second part. And Mr. Yuvraj Singh, an individual residing at 5904, Duplex Houses, Modern Housing Complex, Mani Majra, Chandigarh- 160101 (Herein after referred as SOURAV) of the Third Part. WHEREAS (a) Yuvraj is an outstanding cricketer of the world repute; (b) PERCEPT has necessary authority to represent YUVRAJ in matters which are the subject matter of this Agreement; (c) ICC is the governing World body, monitoring the game of Cricket, known as the International Cricket Council. (d) Hero Honda is desirous of engaging the services of YUVRAJ through Percept and has agree....
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....ing its registered office at 34 Basant Lok, Vasant Vihar, New Delhi, 110057 ( hereinafter as referred to as 'Client') of the THIRD PART. WHEREAS 'PDM' has been appointed by 'the Client' as one of the agencies, the agency in connection with the promotion or sales and publicity of their products namely Hero Honda motorcycles. AND WHEREAS 'the model' has agreed to act as a model in connection with the promotion of the Products of 'The Client' as defined herein on terms and conditions hereinafter appearing. NOW IT IS HEREBY AGREED as follows: In this Agreement, the following words shall have the following meanings: (a) '' Model Identifications' shall mean any words and/or symbols and/or photographic and/or graphic representations, which identify the the Model and/or his name and likeness, in connection with the Product. (b) 'Product' shall mean any model of two wheelers manufactured by 'The Client' (c) 'Endorsed Products' shall mean the Product of 'The Client' which is advertised or promoted in connection with the Model Identification. (d) 'Contract Territory' shall mean India. (e) 'Contract Period' shall mean a period of (12) months commencing from 1st Septembe....
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....other commitments and subject to the Client provided for all travel, meal and accommodation expenses, including business class airfare and five star accommodation/suitable accommodation wherein facility is not available for "The Model" 8. CREATIVE APPROVAL "The Model" has the right of reasonable approval of all commercials and films in storyboard form and the copy of all print advertisements, provided however, that such approval, shall be limited to depictions of "The Model" and to words spoken by or attributes to him, and provided further that The Model shall not unreasonable withhold his approval. "PDM" shall send two (2) copies of the storyboard in print form for approval to "The Model' and if "PDM" does not receive any disapprovals in writing within seven (7) days after the receipt of these materials by The Model, they will deem to have been approved by the Model. 9. LABELS/SIGNATURE LINE It is agreed that The client has the right to create a signature line or to affix or attach the Model Identification in any manner or to endorse products themselves or to the associated packaging. As a part of the goods and services of The Client, The Model shall engrave his signatu....
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....rait, voice, silhouette of the Model. (b) "Product" shall mean any model of two wheelers manufactured by The Client. (c) "Endorsed Products" shall mean the Product of "The Client", which is advertised or promoted in connection with the Model Identification. (d) "Contract Territory" shall mean the Republic of India. (e) "Contract Period" shall mean a period of (12) months commencing from 28/10/2002 and concluding on 27/10/2003. (f) " Promotional Period" shall mean the material, based on the Model Identification Rights, created and/or coming into existence pursuant to the Model rendering Services as contemplated under this Agreement and shall include without limitation his photographs, audio recording, visual recordings, films, illustrations, line drawing, internet sites, websites and all other advertising and sales promotional materials used in connection with the exhibition of the Endorsed Product through mass media advertising consisting, inter alia, of various form of packaging and merchandising, including, but without limitation, television, radio, internet, website and press commercials in the Contract Territory during the Contract Period. 2. GRANT OF ENDORSEMENT R....
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....ances, Celebrity dinners, Trade promotions, Consumer promotions, Plant Visits, staff motivation seminars in relation to the Products. (b) These Services to be provided by the Model will take place on mutually convenient dates and in mutually convenient locations to be agreed in the light of the Models professional and other commitments and subject to the Client provided for all travel, meal and accommodation expenses, including business class airfare and five star accommodation/suitable accommodation wherein facility is not available for "The Model" and a PDM representative. One full day shall mean a shift of eight (8) hours and shall be exclusive of travel time. (c) "The Model" shall endeavour to make best efforts and co-operate in every way with "The client" and in public appearance use his judgment in choice of language and general demeanor to create an atmosphere, which would be conducive to appearance effort. (d) That "The Model" will make sure that the bat logo is neat and clean in appearance on the from and back of the bat and that the requirement will be informed to "the Client"/PDM for fresh/replenishment of stickers well in advance. 8. LABELS/SIGNATURE LINE It....
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....Agreement may be terminated in accordance with the terms here of. (f) "Contract Year" shall mean the period of twelve successive months commencing on 23rd September, 2002 during the contract period. 2. GRANT OF ENDORSEMENT RIGHTS. "The Model" grants to "The Client", subject to and on the terms of this Agreement, the right and license to use and exploit the Player Identification throughout the Contract Territory during the Contract Period in connection with the advertisement and promotion of the product, including but not limited to, by way of television, radio, posters, and form of audio-video and printed material. However, it is clarified that "The Client" shall also be entitled to use the Modeldentification in connection with advertisement on the internet. 3. RATAINER FEES. In consideration for the grant of the rights by "the Model", "the Client" shall pay to "the Model", a total retainer fees to the tune of Rs. 12,50,000/-(Rs. Twelve Lakhs and Fifty Thousand Only) as set out hereunder: (a) Rs. 6,25,000 payable on the signing of this Agreement. (b) The balance sum of Rs. 6,25,000 payable after 6 months from singing of the agreement. 5. TAXES All payments to be m....
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....provided further that The Model shall not unreasonable withhold his approval. PDM shall send two (2) copies of the storyboard in print form for approval to The Model and if PDM does not receive any disapprovals in writing within seven (7) days after the receipt of these materials by The Model, they will deem to have been approved by the Model. 9. LABELS/SIGNATURE LINE It is agreed that "The client" has the right to create a signature line or to affix or attach the Model Identification in any manner or to endorse products themselves or to the associated packaging. As a part of the goods and services of The Client, The Model shall engrave his signature/initials, it being understood that the signature line shall be engraved on the actual goods and services to be promoted and marketed. The Model shall have the right of approval of the use of his signature and depiction on the signature line of goods or services, such approval not to be unreasonably withheld. From the above tripartite agreements, it clearly shows that all the cricket players are engaged through the appellant in providing advertisement and promotion of the product of M/s. Hero Honda Motors Ltd. The appellant are pai....
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....n connection with the promotion or sales and publicity of their products (b) The cricket player, through his agent, has agreed with the Appellant to act as Model ' in advertisements, for the promotion of the endorsed products of Hero Honda, through television, radio, internet and other printed material (c) The Model shall be available for the purpose of conceptualizing, creating, and producing advertising campaigns in relation to endorsed products (d) Hero Honda to provide for business class travel and five star accommodation for the Model and the Appellant (e) Appellant shall have the right/responsibilio., as well as duty to get all approval of all materials provided, relating to depiction of Hero Honda and any product/models/programme under the Hero Honda umbrella (f) All payments under this agreement shall be made to the Appellant in Indian rupees and shall be subject to service tax (g) upon expiry of this agreement, Hero Honda shall cease to use the Model identification promotional material to advertise their endorsed products (h) The Appellant/Hero Honda shall indemnify the Model for any damages rising out of any act of the Appellant/Hero Honda in relation to advertisement....
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....n or sales and publicity of their products they were in fact, involved in the making, preparation, display or exhibition of advertisements, as defined under Sec 65(3) of the Act. The Board Circular No. 341/43/96-TRU, dated 31-10-1996, had clarified that, The expression "advertising agency" has been defined to mean any commercial concern engaged in providing any services connected with the making, preparation, display or exhibition of advertisements and includes an advertising consultant. It would, thus, be noticed that the scope of the service which is included in the tax net extends not only to any service connected with making, preparation of advertisements but also includes any service connected with display or exhibition of advertisements. The Tribunal decision in the Zee Telefilms Ltd [2006 (4) STR 3491 relating to a caterer or lawyer or cinema hall who are merely associated with a advertisement film, cited by the Appellant, is not relevant to the facts of their case, since they were not merely associated but were, in fact, involved with conceptualizing, creating, and producing advertising campaigns, with the Models, in relation to the endorsed products, as per the said tripar....
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....ax on the value of taxable services, received during any calendar month, shall be paid to the credit of the Central Government by the 25th of the month immediately following the said calendar month. The Board has also clarified, vide Circular No. 341/43/96-TRU, dated 31-10-1996, that the advertising agency is legally bound to collect and pay service tax. However, if the advertising agency fails to collect the service tax, the responsibility for payment of tax lies on the advertising agency. The advertising agency, therefore, cannot claim any exemption from payment of service tax on the ground that the same was not paid by the client. (iii) In having received payments from M/s Hero Honda, for rendering advertising services, as per the tripartite agreements, it was the responsibility of the. Appellant for paying the service tax, as per Sec 67 of the Act, read with Rule 6(1) of the Service Tax Rules, 1994. M/s Hero Honda, a manufacturer of two wheelers, was not liable to pay service tax on behalf of the service provider. Appellant, as the service provider, were legally bound to collect and pay service tax, and a clause in the agreement cannot absolve the Appellant of their responsibi....